Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Supplementary memorandum by Metro (Bus 14A)

BUS INDUSTRY INQUIRY

  Thank you for your letter of 14 May in which you ask for clarification in respect of a number of points. I will deal with your queries in the order raised.

1.   Details of rates of return typically found in PTE areas compared to London

  This information is abstracted from a preliminary report for PTEG produced by the TAS Partnership in April this year. The table shows the range of margins operating, the highest being the 25 per cent West Midlands, with figures of 19 per cent in Yorkshire, but as low as 10.8 per cent for Arriva Manchester and 14 per cent for First Manchester Ltd. A useful summary position (see attached "page 11") which shows operating margins being at 15.7 per cent in PTE areas.

  For comparison with London, I attach a table (``page 17") from the report which shows that the overall position was an operating profit margin of 7.5 per cent in the current year and just under 10 per cent last year. Interestingly, the tables show that return on capital employed was about twice as high at around 45 per cent in the PTE areas as opposed to 23 per cent in London.

2.   The amount of subsidy provided in each PTE area and how this compares to the fares revenue taken by the operators

  I attach a table which gives you the above information in the detail you require. However, this figure supplied by the Department, includes Concessionary Fares and pre-paid ticket receipts. This would, therefore, give a figure of around £0.5 billion fares revenue. It does not include the very significant levels of capital expenditure invested by PTEs. Subsidy equates to 60 per cent of the passenger receipts—and approaching 40 per cent of total receipts (fares plus subsidy).

3.   How important are reliability and punctuality compared with service frequency and fare levels?

  PTEs have a body of research findings in relation to this question and I have asked colleagues to produce a summary position for you which I will let you have as soon as possible. There is a consensus that reliability and dependability are judged to be more important than frequency and fares. However, I also enclose an extract from a recent South Yorkshire Community Audit which shows frequency (24 per cent) and cost (18 per cent) as second and third in a table of "chief concerns".

  Also the fares issue needs to be treated with some caution when one talks about the disadvantaged in our society. For example, you will be aware that the Social Exclusion report shows that 47 per cent of 16-18 year-old students find it difficult to meet their transport costs. Also, one in four job seekers say that the cost of transport is a barrier to getting to interviews.

  I hope you find this information useful and please contact me if you require any further details.

Kieran Preston

Director General

27 May 2002

Table 1

OVERALL RESULTS 2000-01: ENGLISH PTE OPERATORS

Item	Current year	Last year	Percentage change
	£000	£000
Results
Turnover	£713,147	£692,678	+3.0%
Operating Costs	£601,430	£580,157	+3.7%
Operating Profit/(Loss)	£111,717	£112,521	¸0.7%
Other Expenses/(Income)	£8,596	£6,924	+24.1%
Pre-Tax Profit/(Loss)	£103,121	£105,598	¸2.3%
Statistics
Net Assets (£000)	£227,020	£232,019	¸2.2%
Capital Expenditure (£000)	£65,757	£86,578	¸24.0%
Employees—Management and Administration	1,348	1,479	¸8.9%
—Operational Staff	20,850	21,296	¸2.1%
—Total	22,198	22,775	¸2.5%
Performance
Operating Profit/(Loss) Margin	15.7%	16.2%
Pre-Tax Profit/(Loss) Margin	14.5%	15.2%
Return on Capital	45.4%	45.5%
Turnover per Employee	£32,127	£30,414
Pre-Tax Profit/(Loss) per Employee	£4,645	£4,637

  3.3.1  It is apparent from Table 7 below that the most significant deterioration in industry financial performance occurred in London, where operating costs rose by almost 14 per cent, whilst turnover grew by just under 11 per cent. As a result, operating profits fell by almost 16 per cent. Interest costs following recent very heavy investment, rose by 48 per cent, resulting in a further deterioration in pre-tax profits, which fell by almost 30 per cent.

  3.3.2  It is also worth noting that capital investment increased as a result of TfL's continuing requirement for new vehicles on contracts, reaching £77.8 million, and accounting for almost 34 per cent of total capital spending in the industry.

Table 7

LONDON OPERATOR RESULTS 2000-01

Item	Current year	Last year	Percentage change
	£000	£000
Results
Turnover	£523,636	£471,999	+10.9%
Operating Costs	£484,404	£425,361	+13.9%
Operating Profit/(Loss)	£39,232	£46,638	¸15.9%
Other Expenses/(Income)	£11,178	£7,551	+48.0%
Pre-Tax Profit/(Loss)	£28,054	£39,088	¸28.2%
Statistics
Net Assets (£000)	£119,809	£110,908	+8.0%
Capital Expenditure (£000)	£77,826	£74,494	+4.5%
Employees—Management and Administration	489	354	+38.1%
—Operational Staff	14,645	13,986	+4.7%
—Total	15,134	14,340	+5.5%
Performance
Operating Profit/(Loss) Margin	7.5%	9.9%
Pre-Tax Profit/(Loss) Margin	5.4%	8.3%
Return on Capital	23.4%	35.2%
Turnover per Employee	£34,600	£32,914
Pre-Tax Profit/(Loss) per Employee	£1,854	£2,726

Table 17

CURRENT PRICES

  Local bus services in England:

  *  Passenger receipts in each Met: current prices

£millions	London	All English Met. areas	Tyne & Wear	West Yorkshire	South Yorkshire	Merseyside	Greater Manchester	West Midlands
1980	208	357	-	-	-	-	-	-
1981	212	365	-	-	-	-	-	-
1982	258	398	-	-	-	-	-	-
1983	267	416	-	-	-	-	-	-
1984	272	428	-	-	-	-	-	-
1985-86	294	442	63	78	38	48	108	107
1986-87	303	459	66	78	59	50	94	112
1987-88	311	499	63	87	59	58	109	123
1988-89	337	523	71	87	63	60	114	127
1989-90	373	556	76	96	62	66	124	133
1990-91	409	584	81	98	69	66	128	142
1991-92	418	615	82	100	73	68	138	154
1992-93	432	626	81	101	75	72	137	160
1993-94	464	643	86	105	78	69	143	162
1994-95	492	656	83	106	81	74	140	173
1995-96	520	656	83	107	79	78	142	167
1996-97	561	672	85	109	81	90	138	169
1997-98	599	719	86	120	105	87	140	182
1998-99	626	718	88	117	81	98	154	180
1999-00	652	704	87	118	80	96	142	181
2000-01	674	747	93	129	83	104	152	186
Percentage change:
1 year	3	6	7	9	4	8	7	3

  Prior to 1985-86 data were collected on a different basis. Adjusted using the GDP market price deflator.

  These figures include PTE subsidy.

Table 2

INDIVIDUAL OPERATOR STATISTICS

No	Company	Operating profit margin	Pre tax profit margin	Pre tax profit per employee (£)	Turnover (£000)
1	West Midlands Travel Limited	24.3%	26.0%	9,827	176,731
2	Arriva Yorkshire Limited	19.0%	16.9%	4,957	20,653
3	Busways Travel Services Ltd	17.9%	17.4%	5,185	43,024
4	Yorkshire Rider Limited (First)	17.8%	15.6%	5,688	94,790
5	Mainline Group Limited	16.6%	14.6%	4,386	60,691
6	Greater Manchester Buses South Ltd	14.6%	12.6%	4,189	53,616
7	Smiths Coaches (Shenington) Limited	13.8%	13.8%	4,855	4,603
8	First Manchester Limited	13.8%	11.7%	3,744	68,545
9	Lionspeed Limited (t/a Pete's Travel)	13.4%	7.6%	2,756	5,890
10	Finglands Coachways Limited	12.9%	11.0%	3,562	4,404
11	Arriva Yorkshire West Limited	12.7%	12.5%	4,222	12,960
12	Arriva North West Limited	11.5%	5.9%	1,704	23,800
13	Arriva Manchester Limited	10.8%	10.8%	3,326	6,975
14	Keighley and District Travel Limited	6.5%	6.5%	2,000	7,605
15	Arriva Yorkshire South Limited	5.3%	2.0%	661	1,921
16	Arriva Merseyside Limited	3.9%	2.0%	589	64,053
17	Yorkshire Traction Company Limited	3.6%	1.6%	372	50,373
18	The Birmingham Coach Company Limited	3.5%	2.3%	606	5,146
19	The Barnsley & District Traction Company Ltd	2.6%	(0.1%)	(20)	1,797
20	Andrews (Sheffield) Limited	(1.4%)	(5.6%)	(1,247)	5,569

2.2  Figures for Scotland

  2.2.1  In Scotland, the position is more complex, since Stagecoach accounts for all its Scottish operations in one company, Stagecoach (Scotland) Ltd. Therefore, the figures for the whole country have been included, and are shown in Table 3 below.

  2.2.2  Here again, performance deterioated during the year, with a 4 per cent increase in turnover outstripped by a 5.2 per cent increase in operating costs. As a result, operating profits fell by 5.2 per cent. Interest expenses more than doubled, with the result that pre-tax profits fell by over 9 per cent. Operating margins deterioated from 11.9 per cent to 10 per cent, and pre-tax margins from 11.5 per cent to 10 per cent. As yet, the figures exclude First Edinburgh.

  2.2.3  It will be seen from the "league table" of results that the two main Strathclyde operators, First Glasgow (No 1) and First Glasgow No 2 (formerly Kelvin Central), earned operating margins of 12.5 per cent and 8 per cent respectively. Stagecoach earned 9.5 per cent.

IMPORTANCE OF RELIABILITY AND PUNCTUALITY COMPARED WITH SERVICE FREQUENCY AND FARE LEVELS

  One can generalise and say that reliability and punctuality are a key issue on less frequent serviced corridors, and fares are more of an issue in interchanging.

PRIORITIES (FROM SOUTH YORKSHIRE BUS STRATEGY—SEPTEMBER 2001)

  Market research among bus users over a number of years has consistently shown that the three issues of most concern are:

—  reliability;

—  frequency of services; and

—  accessibility ie the ease of getting to and then boarding and alighting.

PRIORITIES—(FROM DRAFT BUS STRATEGY CONSULTATION—MAY 2001)

  The main priorities for improvements highlighted in the focus groups and business interviews were as follows:

—  modern and accessible buses on all routes;

—  improved cleanliness of buses;

—  improved reliability;

—  real time service information;

—  more pleasant drivers;

—  cheaper fares/improved ticketing;

—  conductors on buses;

—  improving services to particular destinations;

—  more widespread information on tickets/fares/routes/times;

—  double deckers at peak times to relieve overcrowding on some routes;

—  improved co-ordination of services to make interchanging easier;

—  reduced journey times; and

—  more frequent services (on some routes).

CHIEF ISSUE OF CONCERN—(FROM SHEFFIELD COMMUNITY AUDIT 1999 (PRIORITY FIVE WARDS))

  Reliability—26 per cent.

  Frequency—24 per cent.

  Cost—18 per cent.

  Journey time—9 per cent.

IMPORTANCE OF FOLLOWING ISSUES TO RESPONDENTS AT A PARK AND RIDE SITE (FROM SYPTE MARKET RESEARCH)

  Reliability of service (96.6 per cent)

  Secure car parking (93.2 per cent).

  Frequency of service (91.9 per cent).

  Cost of parking no more than current cost (85.1 per cent).

  Length of journey (73.4 per cent).

  Timetable information at the site (73.0 per cent).

  Information regarding ticket types and cost at the site (72.7 per cent).

  Good waiting facilities (72.8 per cent).

  Clear signs/directions to the park and ride site (71.4 per cent).

  Comfort of journey (56.5 per cent).

INCOME RECEIPTS BREAKDOWN FOR THE FINANCIAL YEAR 2000-01

All figures stated in £m
	T&W PTA	GM PTA	MPTA	SYPTA	WYPTA	WMPTA	Total
Total Receipts As Per DTLR	93	152	104	83	129	186	747
Less: Concessions As Per DTLR	(15)	(31)	(44)	(11)	(22)	(51)	(174)
Less: Tendered Services	(4)	(14)	(11)	(5)	(14)	(5)	(52)
Passenger Income Received (Cash & Prepaid)	74	106	49	68	93	131	521
Add: Concessions As Per PTE Figures	19	38	33	11	20	54	175
Add: Tendered Services Per PTE Figures	4	14	11	5	14	5	52
Revised Total Receipts Figure Excluding FDR	96	159	93	83	128	189	748
Fuel Duty Rebate Estimates	16	23	15	15	20	25	115
Revised Total Receipts Figure Including FDR	113	182	108	98	148	214	863
% of Bus Subsidy against Total Receipts exc FDR (Bus Subsidy equates to Concessions & Tendered Services)	23.96%	32.70%	47.31%	19.28%	26.56%	31.22%	30.35%
% of Bus Subsidy against Income Inc FDR (Bus Subsidy equates to Concessions & Tendered Services & FDR)	34.51%	41.21%	54.63%	31.63%	36.49%	39.25%	39.63%
% of Passengers Income (Cash & Prepaid) against Total Receipts exc FDR	77.08%	66.67%	52.69%	81.93%	72.66%	69.31%	69.65%
% of Passenger Income (Cash & Prepaid) against Total Receipts inc FDR	65.49%	58.24%	45.37%	69.39%	62.84%	61.21%	60.37%
Ratio Analysis:
Passenger Income exc FDR to Bus Subsidy	3.22:1	2.04:1	1.11:1	4.25:1	2.74:1	2.22:1	2.29:1
Passenger Income inc FDR to Bus Subsidy	1.90:1	1.41:1	0.83:1	2.19:1	1.72:1	1.56:1	1.52:1

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Prepared 12 September 2002